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Venture capital scene:

More money flowed into San Diego in 2012

Last spring, one San Diego company that trades cash for trash got a big pay day of its own.

Kiosk company ecoATM, which dispenses money in exchange for recycled electronics, raised $17 million to expand into more grocery stores and malls across the United States.

EcoATM’s series B investment round was one of 85 deals that occurred in San Diego in 2012, according to a report from Dow Jones VentureSource.

Locally, venture capital investment in 2012 was up for the year, totaling $1.19 billion, compared to $995.7 million for 87 deals in 2011.

The health care industry in San Diego was the big winner last year, with $668.96 million for 41 deals, up from $516.45 million for 46 deals in 2011.

The sector incorporates biopharmaceuticals, medical devices and equipment, as well as medical software and information.

The life sciences industry will remain a money magnet in 2013, predicts Rory Moore, CEO and founder of San Diego-based CommNexus, a nonprofit technology industry association.

Venture capitalists released the floodgates into the business and financial services sector last year, with investments nearly tripling from $34.21 million in 2011 to $100.16 million in 2012.

Investments in consumer goods -- which include household, office and personal goods and vehicle parts -- also surged, from $1.6 million in 2011 to $51.46 million in 2012.

San Diego’s fourth quarter proved to be its weakest for the year, with $166 million flowing into 18 deals. The same quarter a year earlier tracked $350 million for 17 deals.

“Investors became increasingly cautious as exit activity and venture capital fund-raising declined in the latter half of 2012, which seems to have hindered many startups’ efforts to raise money before the year ended,” said Maryam Haque, senior research analyst for Dow Jones.

CommNexus, which works to speed up the formation, growth and success of the technology industry in the region, said its companies raised $95 million in 2012.

“Almost $96 million,” Moore said. “That is pretty good for a little incubator here in San Diego.”

In years past, however, it’s been more than double that figure. CommNexus was hoping to break the $100 million mark by the end of 2012.

“We just missed it because we had a couple companies who haven’t closed financings in the last 30 days,” Moore said.
He expects the $95 million figure to jump to $165 million in 2013.

“In 2013, based on what is on my radar screen, there will be another $70 million,” he said. “That will be a couple whales getting very large C rounds,” he said.

In 2012, funding types were evenly split, he added.

“We had about one third of capital from VC, one third from corporate VC and one third from angel investors,” he said.

Its EvoNexus arm acts as an incubator for high-tech startup ventures. In February, EvoNexus opened a new 15,000-square-foot downtown site to much fanfare.

Its software startups develop mobile apps and Internet services targeting location-based services, social engagement and cloud computing.

“All are looking for money -- that’s a given,” he said.

Within the past six months, seven of the 20 companies in the EvoNexus incubator raised anywhere from $500,000 to $1.5 million. They range from language learning tool Nulu to personal travel guide Citybot, as well as Fatskunk, Cashie Commerce, Tomnod, Breadcrumbs and Antengo.

Funds came in the form of both corporate and angel venture capital dollars.

“Most people don’t realize this is a very vibrant, high-tech angel network. So it’s really a great place to raise money from angels,” Moore said. “The venture capital community here is very strong.”
It doesn’t hurt that a major money mecca sits just a short flight away, in Silicon Valley.

“In Northern California you’ve got investors that invest in all areas -- pharma, life sciences, high-tech and e-commerce,” he said.
In 2013, investors will continue to target companies such as ecoATM that produce fast returns.

“The kiosks pay for themselves quickly. So investors have seen that they can go cash positive quickly,” Moore said.

Nationally, venture capital investment in 2012 totaled $29.7 billion for 3,363 deals, a 15-percent decline in capital and a four-percent decline in deals from the previous year, noted the Dow Jones report.

IT continued to attract investors throughout 2012, accounting for 33 percent of the total venture capital investment.

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